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A spectral analysis of the cross-country consumption correlation puzzle

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  • Michael R. Pakko

Abstract

Dynamic general equilibrium models predict high cross-country consumption correlations, whereas the data show that output correlations tend to be higher. Spectral decomposition reveals that this ranking varies across frequency bands, with consumption correlations often exceeding output correlations at higher frequencies.

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  • Michael R. Pakko, 2004. "A spectral analysis of the cross-country consumption correlation puzzle," Working Papers 2003-023, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:2003-023
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    Cited by:

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    5. Buerhan Saiti & Azlan Ali & Naziruddin Abdullah & Sulaiman Sajilan, 2014. "Palm Oil Price, Exchange Rate, and Stock Market: A Wavelet Analysis on the Malaysian Market," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 2(1), pages 13-27.
    6. Heathcote, Jonathan & Perri, Fabrizio, 2014. "Assessing International Efficiency," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 523-584, Elsevier.
    7. Toshihiro Okada, 2018. "International R&D Spillovers, Innovation by Learning from Abroad and Medium-Run Fluctuations," Discussion Paper Series 183, School of Economics, Kwansei Gakuin University.
    8. Pami Dua & Vineeta Sharma, 2013. "Measurement And Patterns Of International Synchronization-- A Spectral Approach," Working papers 224, Centre for Development Economics, Delhi School of Economics.
    9. Graham, Michael & Kiviaho, Jarno & Nikkinen, Jussi, 2012. "Integration of 22 emerging stock markets: A three-dimensional analysis," Global Finance Journal, Elsevier, vol. 23(1), pages 34-47.
    10. Saiti, Buerhan & Bacha, Obiyathulla & Masih, Mansur, 2014. "Is the global leadership of the US financial market over other financial markets shaken by 2007-2009 financial crisis? Evidence from Wavelet Analysis," MPRA Paper 57064, University Library of Munich, Germany.
    11. Rua, António, 2010. "Measuring comovement in the time-frequency space," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 685-691, June.
    12. Wenjing Xie & João Paulo Vieito & Ephraim Clark & Wing-Keung Wong, 2020. "Could Mergers Become More Sustainable? A Study of the Stock Exchange Mergers of NASDAQ and OMX," Sustainability, MDPI, vol. 12(20), pages 1-25, October.
    13. Tatsuma Wada & Pierre Perron, 2005. "An Alternative Trend-Cycle Decomposition using a State Space Model with Mixtures of Normals: Specifications and Applications to International Data," Boston University - Department of Economics - Working Papers Series WP2005-43, Boston University - Department of Economics.
    14. Abdullah, Ahmad Monir & Saiti, Buerhan & Masih, Abul Mansur M., 2014. "Causality between Stock Market Index and Macroeconomic Variables: A Case Study for Malaysia," MPRA Paper 56987, University Library of Munich, Germany.
    15. Zulfiqar Ali Imran & Muhammad Ahad, 2022. "Safe-haven investments against stock returns in Pakistan: a role of real estate, gold, oil and US dollar," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 16(1), pages 167-189, February.
    16. Imran, Zulfiqar Ali & Ahad, Muhammad, 2021. "Safe Haven or Hedge: Diversification Abilities of Asset Classes in Pakistan," MPRA Paper 107613, University Library of Munich, Germany, revised 02 May 2021.
    17. António Rua & Artur Silva Lopes, 2015. "Cohesion within the euro area and the US: A wavelet-based view," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2014(2), pages 63-76.
    18. Shabeer Khan & Niaz Ahmed Bhutto & Uzair Abdullah Khan & Mohd Ziaur Rehman & Wadi B. Alonazi & Abdullah Ludeen, 2022. "Ṣukūk or Bond, Which Is More Sustainable during COVID-19? Global Evidence from the Wavelet Coherence Model," Sustainability, MDPI, vol. 14(17), pages 1-20, August.
    19. Tatsuma Wada & Pierre Perron, 2006. "State Space Model with Mixtures of Normals: Specifications and Applications to International Data," Boston University - Department of Economics - Working Papers Series WP2006-029, Boston University - Department of Economics.
    20. Zi-Yi Guo, 2017. "International Real Business Cycle Models with Incomplete Information," Proceedings of Economics and Finance Conferences 4507458, International Institute of Social and Economic Sciences.
    21. Rua, António & Nunes, Luís C., 2009. "International comovement of stock market returns: A wavelet analysis," Journal of Empirical Finance, Elsevier, vol. 16(4), pages 632-639, September.
    22. Lukasz Lenart, 2015. "Discrete Spectral Analysis. The Case of Industrial Production in Selected European Countries," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 15, pages 27-47.
    23. George Tzagkarakis & Juliana Caicedo-Llano & Thomas Dionysopoulos, 2016. "Time-Frequency Adapted Market Integration Measure Based on Hough Transformed Multiscale Decompositions," Computational Economics, Springer;Society for Computational Economics, vol. 48(1), pages 1-27, June.
    24. Guo, Zi-Yi, 2017. "International Real Business Cycle Models with Incomplete Information," EconStor Preprints 168432, ZBW - Leibniz Information Centre for Economics.
    25. Nikola Gradojević & Eldin Dobardžić, 2013. "Causality between Regional Stock Markets: A Frequency Domain Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 633-647, September.

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    Keywords

    Business cycles; Consumption (Economics);

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